Paterson mill conversions slow, along with housing market

Michael Stengart fell in love with the old silk mills of Paterson when he worked in the textile industry in New York. So after the coat factory at 175 Broadway shut its doors about 10 years ago, Stengart turned the five-story brick building into housing, just as other Paterson mills had been transformed.

"It has tremendous potential as far as the quality of the building and the proximity to the railroad station, downtown Paterson and the Center City mall," said Stengart, who put more than $7 million into a gut renovation.

But the project's timing was unfortunate. It opened in 2008, as the housing market was imploding and the financial industry was sliding into crisis. As mortgage money dried up, sales languished. Three years later, only 70 percent of the 48 units are occupied — a majority of them as rentals, with an option to buy.

Began in 1980s

The Silk City project is an example of the housing bust's profound impact on efforts to redevelop the old mills in Paterson. Those conversions started in the 1980s, when developers were first drawn to the massive brick factories. The buildings typically offer high ceilings, open spaces, solid construction and large windows that let light pour in.

Many developers put in the extras that buyers crave, often including granite counters and hardwood floors. The result are often strikingly attractive properties that would sell quickly in hipper places such as Hoboken.

But redevelopment of the Paterson mills has slowed to a crawl, as a result of lower demand, a difficult economy and a lack of financing. Getting a construction loan is "mission impossible," Stengart said.

John Susani of Coldwell Banker Susani Realty in Paterson said the market for condos in old mill buildings has long been weak. Susani said the city's taxes, which have jumped more than 25 percent in the past two years, make Paterson an even tougher sell to people wary of inner-city living.

One new project that has moved forward is the Lofts at Bunker Hill. The nine one- and two-bedroom units, priced from $199,000 to $349,000, feature 13-foot ceilings, granite countertops, stainless steel kitchen appliances, walk-in closets and hook-ups for washers and dryers. The building, an old wire factory, is in a working-class neighborhood, across the street from a city recreation center.

The properties have been on the market since September, with none sold yet, according to listing agent Natalie Lentini of Coldwell Banker in Parsippany.

Condos, however, have been a tough sell in this market. Silk City's Stengart is one of a number of North Jersey developers who started out building condominiums in the housing boom, only to re-position them as rentals when tighter lending standards meant their customers couldn't get mortgages.

Condos turn rentals

George McLoof, president of Longstreet Development Corp., also went that route with two recent mill conversions, the Congdon Mill on Van Houten Street and the old Hoxsey-Horandt Mill (now called the Hamilton Heights residences) on Marion Street.

Both are now rentals, though they were originally planned as condos.

McLoof, who has converted a number of the old mills in almost three decades in business, said he has no immediate plans for another mill project in Paterson.

"As far as I know, no one's doing anything right now," McLoof said. And he thinks construction won't return to normal levels for at least two years, because the large inventory of foreclosed properties is "a big cloud over the market." Builders can't compete with foreclosures' low prices, McLoof said.

McLoof is focusing his current efforts in Paterson on a new office project near St. Joseph's Hospital. But he thinks the mill conversions have a future.

He's encouraged by the recent designation of the Great Falls as a national park, which he thinks will boost the neighborhood's image and the appeal of the many old mills nearby.

'A lot of character'

"I personally like the old mills. The buildings have a lot of character," McLoof said. "The advantage they have, other than esthetic, is that they were built to hold very heavy equipment, and they're structurally very sound as a result."

Lawrence "Pat" Kramer, a former mayor of Paterson who now works in development, says the successful redevelopment of the mills depends on a number of factors, including the neighborhood — especially whether it's safe and has amenities such as shopping and restaurants.

"You're not going to lease or purchase an apartment if you think that neighborhood is something you're not going to be comfortable in," Kramer said. Having said that, he called many of the older brick buildings "fabulous."

"Some of the big old silk boys and railroad boys in Paterson took a lot of pride in what they were creating," Kramer said.